Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2019

3. Fair Value of Financial Instruments

The fair value of an asset or liability represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

The Company reports assets and liabilities measured at fair value using a three level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets that the Company has the ability to access as of the measurement date.

Level 2—Inputs are: quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.); and inputs that are derived principally from or corroborated by observable market data by correlation or other means (i.e., market corroborated inputs).

Level 3—Unobservable inputs that reflect the Company’s own assumptions, based on the best information available, including the Company’s own data.

The Company's financial assets that are required to be measured at fair value on a recurring basis are as follows, in thousands of dollars:


	Fair Value Measurements at
	March 31, 2019
	(unaudited)
					Significant
	Total Fair		Quoted Prices		Other		Significant
	Value at		in Active Markets		Observable		Unobservable
	March 31,		for Identical Assests		Inputs		Inputs
	2019		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	122,778	$	122,778	$	—	$	—
Marketable securities
Corporate debt securities		170,165		246		169,919		—
Long term marketable securities
Corporate debt securities		521,398		450		520,948		—
Government debt securities		1,153		—		1,153		—
Other non-current assets
Marketable securities - restricted (SERP)		375		1		374		—
Total assets at fair value	$	815,869	$	123,475	$	692,394	$	—


	Fair Value Measurements at
	December 31, 2018
					Significant
	Total Fair		Quoted Prices		Other		Significant
	Value at		in Active Markets		Observable		Unobservable
	December 31,		for Identical Assests		Inputs		Inputs
	2018		(Level 1)		(Level 2)		(Level 3)
Assets:
Cash and cash equivalents	$	192,248	$	192,248	$	—	$	—
Marketable securities
Corporate debt securities		163,770		245		163,525		—
Long term marketable securities
Corporate debt securities		415,650		445		415,205		—
Government debt securities		3,148		—		3,148		—
Other non-current assets
Marketable securities - restricted (SERP)		326		1		325		—
Total assets at fair value	$	775,142	$	192,939	$	582,203	$	—

Level 1 assets include cash held at banks, certificates of deposit, money market funds, and investment grade corporate and government debt securities.

Level 2 assets include the SERP (Supplemental Executive Retirement Plan) assets, commercial paper and investment grade corporate and government debt securities and other fixed income securities. Level 2 securities are valued using third-party pricing sources that apply applicable inputs and other relevant data in their models to estimate fair value. The fair value of the restricted marketable securities is recorded in Other Assets in the condensed consolidated balance sheets.

The carrying amounts of other financial instruments, including accounts receivable, accounts payable and accrued expenses approximate fair value due to their short-term maturities.

The following table sets forth the Company’s financial liabilities that are not carried at fair value, in thousands of dollars:


	March 31, 2019				December 31, 2018
	(unaudited)
	Carrying Value		Fair Value		Carrying Value		Fair Value
2023 Notes	$	333,310	$	388,664	$	329,462	$	375,834

The fair value is estimated based on actual trade information as well as quoted prices provided by bond traders and is characterized within Level 2 of the fair value hierarchy.

Unrestricted available-for-sale marketable securities held by the Company are as follows, in thousands of dollars:


	March 31, 2019		December 31, 2018
	(unaudited)
Corporate and government debt securities
Amortized cost	$	690,853	$	586,726
Gross unrealized gains		2,905		55
Gross unrealized losses		(1,042)		(4,213)
Total fair value	$	692,716	$	582,568

The contractual maturities of the unrestricted available-for-sale marketable securities held by the Company are as follows, in thousands of dollars:


	March 31,
	2019
	(unaudited)
Less than 1 year	$	170,165
1 year to 2 years		170,246
2 years to 3 years		181,872
3 years to 4 years		170,433
Greater than 4 years		—
Total	$	692,716

The Company has not experienced any other-than-temporary losses on its marketable securities.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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